Car Insurance

How Much Are Extended Car Warranties

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 4 minute read

You could be feeling pretty happy right now if you had a test drive in a brand-new car that you’re really contemplating purchasing. But soon enough, you will be summoned to the accounting office to finalize the deal by signing the necessary documents. 

Now is the time to consider whether or not to invest in an extended auto warranty. There could be some bewilderment if this choice was unexpected. Even if it might not feel like it at the time, this is a major choice that will affect you both now and in the future. 

Essentially, an extended warranty serves the same purpose as car insurance. If a problem arises while the product is still under warranty, you won’t have to shell out any cash to get it fixed. The term “extended” refers to the fact that you are paying for coverage beyond that which the manufacturer provides as standard.

Asking yourself the following questions will help you determine whether an extended warranty is appropriate for you and your car:

  1. What kind of warranty is offered with your car? A 10-year/100,000-mile warranty, for instance, is included with every new Hyundai. Is there anything further you need to say about this? Some manufacturers, on the other hand, only provide coverage for new vehicles for three years or 36, 000 miles. Is the included warranty appropriate for how long you intend to retain your car, you could ask? There is no benefit to purchasing an extended warranty if your car will only be driven for 36,00 miles. It would be wasteful to do this.
  2. How reliable has the car you’re considering in the past been? Even though this approach to decision-making is not foolproof, it is something to take into account. You have a better chance of keeping the car for many years without ever needing to submit a warranty claim if you choose a model that is renowned for its dependability, like a Honda Civic. On the other hand, certain cars have a track record of being unreliable. Online resources like Edmunds.com make all of this information easily accessible.
  3. Whose business is the extended auto warranty from? Others are administered by a third party; these are typically aftermarket warranties. Some are supported by the manufacturer. The cost of aftermarket solutions is lower than that of manufacturer extended warranties, which are typically rated higher and offer more in terms of simplicity.
  4. Does a deduction apply? Before acquiring any extended warranty, you must inquire about this. The expense of paying a deductible can quickly mount up, despite the fact that it might not seem like a huge deal. A deductible can be used in numerous different contexts. For instance, do you have a visit-by-visit deductible? Or do you have to pay a deductible for each repair? In the second case, making three repairs practically amounts to paying the deductible three times.
  5. Can repairs be made at any dealership or service facility? For some, you need to go to the dealership where you bought the car. If you reside in the neighborhood and are eager to work with the dealership, this is not a big concern. However, if something changes, like a relocation to a different region of the country, your warranty can be rendered useless.

Advantages

  • Longer coverage on top of the included warranty
  • Saves you money on repair bills in the future
  • Can be financed if purchased at the same time as your vehicle

Disadvantages

  • The price range is between $1,000 and $1,500 if acquired directly from the producer.
  • In other words, if you don’t buy it when you buy your car, you’ll have to shell out more cash. You can’t include it in your loan.
  • Possibly never have to use the warranty if your car never breaks down

My Adventure

I spent about $1,100 on a Honda Accord a few years ago, and that included an extended warranty. I debated whether to buy but ultimately settled on doing so since I wanted security for the future. 

My vehicle was protected for 7 years or 80,000 miles thanks to the extended warranty. My low mileage meant that I could rest assured that my policy would remain in effect until the end of the seven-year term, even if I sold the car during that time.

My thoughts, then? In my case, I forked up the $1,100 and never made a single warranty claim. One positive interpretation is that I now own a very dependable car. Nonetheless, I lost $1,100 and didn’t even get anything in return. 

Naturally, there was no way to know this at the time. This is why you should treat it like an insurance premium. It’s possible you’ll never use it, but it’s also possible you’ll need it in the event of a major disaster. In addition, the assurance of having your car repaired or replaced if something should happen to it is likely to be of some value to you.

You should weigh your alternatives and ask yourself the aforementioned questions before settling on an extended warranty decision. You will have a greater chance of making the best choice if you take the time to gather as much relevant information as possible.

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